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Regional inequality and immiserization

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  • Bharati Basu
  • Bharat Hazari

Abstract

In this paper we use a four-sector, two-region model to investigate the impact of an increase in capital on regional income inequality. We also analyze its impact on wages, and rents on capital and land. These changes occur due to a movement in the internal terms of trade - a worsening of the relative price of rural non-traded goods to urban non-traded goods - as distinct from the international terms of trade. We demonstrate that under certain conditions, an increase in urban capital necessarily immiserizes the rural region and thereby increases inequality among regions.

Suggested Citation

  • Bharati Basu & Bharat Hazari, 2008. "Regional inequality and immiserization," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 11(3), pages 201-213.
  • Handle: RePEc:taf:jpolrf:v:11:y:2008:i:3:p:201-213
    DOI: 10.1080/17487870802417222
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    Cited by:

    1. Ratbek Dzhumashev & Jaai Parasnis, 2011. "Taxation and Migration: Policies to Manage a Resource Boom," Monash Economics Working Papers 33-11, Monash University, Department of Economics.

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